Trade, import and export for MSMEs: Exports through e-commerce has become mandatory to a large extent for MSME exporters looking for an affordable gateway to international markets, according to experts speaking at Financial Express Online’s SMExports Summit 2022 on Friday. India crossed $400 billion in exports during the financial year 2021-22 to enhance its share in global trade. This came at a time when crores of MSMEs, which account for nearly half of the country’s exports, were continuing to recover from the Covid crisis. This was over and above the traditional complexities in the supply chain, investments, cross-border payments, technology, and demand uncertainty that had arguably limited the export potential of MSMEs.
“If Indian MSMEs won’t export, then businesses from other countries will capture the (global) market. The major export challenge any MSME faces is finding the right market out of more than 200 countries in the world. Once that is sorted, it is about how to promote or brand the product. If that gets sorted, the distribution is the major challenge,” Rajendra Prasad Sharma, Professor of Marketing, Indian Institute of Foreign Trade said during a panel discussion on accelerating MSMEs’ e-commerce exports.
E-commerce exports can help address these challenges and enable MSMEs with access to a much larger base of potential customers without the need for a local physical footprint and dependence on multiple intermediaries such as export trading and management companies. Also, the topline potential of MSMEs goes up apart from another important dimension of business diversification in selling online as enterprises that have been exporting during Covid were able to sustain its impact and even grow the business to some extent, Abhijit Kamra, Director, Global Trade, Amazon India said during the panel discussion as he explained how e-commerce can solve four key export-related challenges in his address:
Market access: As business-to-business (B2B) exports typically involve (participating in) a lot of trade fairs, it needs significant upfront investment to find buyers. So, the first pursuit for Amazon was how to use technology to simplify storefront creation. If you are an Indian exporter, you have access to customers from over 200 countries through Amazon’s 16 marketplaces globally, said Kamra highlighting the benefit of e-commerce platforms providing direct digital access to customers. Amazon currently runs its Global Selling programme in India to help businesses export. According to the company, over 70,000 sellers are selling on Amazon’s international marketplaces.
Market intelligence: Over the last year, Amazon has created a very large machine learning engine which works on all the data that gets generated (on the marketplace) to give exporters the latest insights on (export) trends to help them make an informed decision on product development, he added.
Logistics: According to Kamra, if an MSME builds its own brand and wants to export products, it is very cumbersome to build a global supply chain. Using Amazon’s logistics service, he said, the carrier will take the product from MSME’s warehouse and deliver it to customers wherever they are or MSMEs can choose their own warehouses as well.
IP creation: Owning IP can help differentiate products and earn customer trust. As a result, if an MSME feels the cost of manufacturing is increasing, they can pass on that cost with an increased price of the product to their customers. IP attracts better valuation and financial terms, said Kamra. Amazon had last year launched an IP accelerator programme in India to provide its sellers with services from IP law firms for securing trademarks, tackling infringement, etc.
The panel also had two MSMEs: apparel manufacturer and exporter Animesh Saxena who runs Neetee Clothings and Hemali Gada, Founder and Managing Director of Hungry Brain which develops learning material in the form of flashcards for newborns to 3-year-old kids focusing on their sensory, brain stimulation and life skill development. Gada has been selling via Amazon since 2018, albeit there have been challenges around returns for her.
“When the product gets discarded, we need to pay 50 cents per product. It is almost a tough job to have the material back. When we give it to the bank saying that this much material has been discarded or the customer would have returned it and it is not being in the condition to be used, then the Reserve Bank of India (RBI) wants proof of it. Amazon doesn’t send us the proof that this is how the product is which they are not keeping because it is unfulfillable. Amazon doesn’t send us the proper bill for pick up and drop charges,” explained Gada.
On the other hand, Saxena, who has been exporting to the US, Europe and Japan, is yet to onboard e-commerce platforms for exports. In apparel, most businesses have been into contract manufacturing. While Saxena ‘half-heartedly’ tried digital exports a few years ago, he failed miserably and went back to contract manufacturing until Covid struck and pushed businesses like Neetee Clothings to look at e-commerce. “We were proved wrong. When people started exploring e-commerce, they found a great response. We are regretting giving up that time,” said Saxena as he is now preparing for a second attempt at e-commerce.
He explained: While there was product depth, a proper manufacturing process along with sourcing and production, it was about the mindset. In a typical B2B enterprise, you have people trained in B2B communication instead of catering to individual customers.
“We are thinking of getting new people who handle customer merchandising. We are also looking to rework the production team because production lines are traditionally meant to produce in bulk and they are not very customised. A person dealing with a customer ordering 10,000 pieces will never do justice to a customer seeking only one piece. This is the biggest learning on the team’s part,” added Saxena who was also the past President of the MSME body Federation of Indian Micro and Small & Medium Enterprises (FISME).
The association April this year suggested a dedicated policy framework in the government’s upcoming Foreign Trade Policy (FTP) for promoting e-commerce exports. The suggestion was part of the inputs shared by FISME to the government to support MSMEs selling goods online. The other key asks to boost e-commerce exports were exempting online sellers from GST registration, simplifying returns in e-commerce exports, and digitising the process of AD code registration (a 14-digit code provided by the bank and required at the port from where customs clear goods).
FISME had also suggested automating the processes related to eBRC (electronic Bank Realisation Certificate for exporters by the bank as payment confirmation from the buyer for goods exported) and eFIRC (electronic Foreign Inward Remittance Certificate that acts as a proof of inward remittance to India) procurement and consolidation.